The UK’s Financial Conduct Authority (FCA) has introduced the Consumer Duty, a significant regulatory change aimed at ensuring that financial firms prioritise the best interests of their customers. This new duty, which came into force in July 2023, represents a shift from simply treating customers fairly to actively delivering good outcomes across all customer interactions.

What Will It Mean for Firms?

Firms are now required to take a more proactive approach to consumer protection. The Consumer Duty mandates that companies assess and improve their products, services, communications, and customer support to ensure that they meet the needs of customers throughout their lifecycle. This includes clearly demonstrating that they are acting in customers’ best interests, providing clear information, and offering products that deliver tangible benefits.

To comply, firms will need to review their existing practices, redesign products, enhance transparency, and invest in training staff. They must also implement comprehensive monitoring systems to ensure ongoing adherence to the Consumer Duty. This is not a one-time effort; it will require continuous evaluation and adjustment as customer needs and market conditions evolve.

Consequences of Non-Compliance

The FCA has made it clear that failure to comply with the Consumer Duty will lead to significant consequences. Firms that do not meet the new standards risk facing strict enforcement actions, including fines, sanctions, and reputational damage. The FCA is expected to take a more assertive approach to supervision, meaning firms should prepare for more frequent and detailed reviews of their consumer practices.

In essence, the Consumer Duty sets a higher bar for customer protection in the UK financial sector. Firms that embrace this change will not only avoid penalties but also build stronger, more trustworthy relationships with their customers.

Contact Hagan Smith if you require assistance with any of the above.